Daily International Grain Market View

Good morning Farmer Family ...

US farm markets saw another volatile session yesterday. 

Corn and soybean prices were firm, with strength in the cash market showing that demand remained strong despite high prices.

Rumours that China have bought 1Mt of US corn have added to the bid side on futures.

Meanwhile most wheat contracts suffered a moderate setback on a round of profit taking as traders closely monitored prospects for grain exports out of Ukraine.

Particularly, corn was up 1.95%.

Soybeans firmed more then 1.70% higher.

The market rallied before midday, but ultimately closed off the highs. 

Soymeal led the way, going home 2.53% higher on the day. 

Bean oil prices closed mixed but mostly higher, as front month took 0.31% gains by the close. 

The wheat market cooled off after the bounce to start the week. Chicago wheat prices closed 1.94% cents lower. 

HRW ended the day with 1.77% losses. 

Spring wheat held firm, but still gave back 0.26% on the day. 

In energy markets, oil prices drifted higher on Wednesday, anticipating a report of low U.S. oil stocks.

Expectations of solid demand in the upcoming driving season also lent additional support.

Thus, Brent crude futures for August were up 40 cents, or 0.3%, at $120.97 a barrel at 06:49 GMT after closing on Tuesday at the highest since May 31.

U.S. West Texas Intermediate crude for July was at $120.01 a barrel, up 60 cents, or 0.5%, after reaching its highest settlement since March 8 in the previous session.

Global crude and oil products supplies remain tight, boosting refiners' diesel margins to record levels.

Analysts expect data for last week to show another drawdown of U.S. crude inventories, although gasoline and distillates stocks could edge higher.

Figures from the American Petroleum Institute, indeed, showed that U.S. crude and oil products inventories rose last week.

The U.S. Energy Information Administration (EIA) will report last week's stock levels at 10:30 a.m. EDT (1430 GMT) on Wednesday.

The CEO of global commodities trader Trafigura said oil prices could soon hit $150 a barrel and go higher this year, with demand destruction likely by the end of the year.

Meantime, the World Bank on Tuesday slashed its global growth forecast for 2022 by nearly a third.

China topped up its first batch of product export quotas aimed at reducing high domestic inventories, which have risen as pandemic lockdowns have dented demand. 

In freight markets, the Baltic Exchange’s main sea freight index hit a more than one-month low on Tuesday, hurt by lower rates across vessel segments.

The overall index, indeed, lost 46 points, or 1.8%, to 2,514 points.

Particularly, the capesize index fell 89 points, or about 3.2%, to 2,668 points.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $738 at $22,128.

The panamax index dropped 26 points, or 0.9%, to 2,815 points.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased by $234 to $25,339.

The supramax index lost 28 points to 2,632 points.

In equity markets, stock indexes initially opened lower on economic growth concerns after Target warned of lower profit margins as it slashes prices to clear out inventory. 

The retail giant sank 2.3% after it announced moves it said were needed to keep up with customers' changing behaviors.

Other retailers got caught in the downdraft, and Walmart fell 1.2%..  

An initial increase in global government bond yields, also weighed on stocks as global central banks tighten monetary policy to rein in inflation. 

On this wake, the Reserve Bank of Australia raised its cash rate by 50 bp to 0.85%, a bigger increase than expectations of a 25 bp increase.

However, in the afternoon, U.S. stock indexes shook off early losses and closed moderately higher. 

The yield on the 10-year Treasury fell back to 2.98% from 3.03% late Monday. 

The two-year yield, which more closely tracks expectations for Fed action, dipped more modestly to 2.72% from 2.73%.

That sparked a rally in technology stocks that led the overall market higher.  

Stocks also garnered support on better-than-expected U.S. trade deficit and consumer credit reports.

Particularly, the U.S. Apr trade deficit of -$87.1 billion was narrower than expectations of -$89.5 billion and the smallest deficit in 4 months. 

The report was supportive of Q2 U.S. GDP.

U.S. Apr consumer credit rose +$38.069 billion, stronger than expectations of +$35.0 billion.

Meantime, as we said, the World Bank cut its 2022 global growth estimate to 2.9% from an April forecast of 3.2% due to a surge in energy and food prices, supply disruptions from the Covid outbreak in China and the war in Ukraine, and higher interest rates from various global central banks.

In this context, the S&P 500 climbed 1% to 4,160.68 after reversing a morning loss of 1%. 

The Dow Jones Industrial Average rose 0.8% to 33,180.14 after bouncing between losses and gains throughout the day. 

The Nasdaq composite gained 0.9% to 12,175.23.

Gains by Apple, Microsoft and other technology stocks were some of the biggest forces lifting the market.

Stocks of energy producers also jumped as oil prices rose to roughly $120 per barrel, up more than 55% for the year so far. 

Exxon Mobil climbed 4.6%, and ConocoPhillips added 4.5%.

Kohl’s soared 9.5% after the department store chain said it’s in advanced talks to sell itself for about $8 billion to Vitamin Shoppe owner Franchise Group. 

Jam maker J.M. Smucker rose 5.7% after reporting stronger earnings than analysts expected.

The next big update on inflation arrives Friday, when the U.S. government releases its latest reading on the consumer price index.

Meantime, shares were mostly higher in Asia on Wednesday. 

Investors are waiting for more clarity on where interest rates, inflation and economies are heading.

Japan's economy contracted at a 0.5% annual rate in the first quarter amid a major outbreak of coronavirus, the Cabinet Office reported. 

However, that was smaller than the 1.0% contraction in the preliminary estimate. 

The latest data showed consumer spending and other private demand was not as weak as earlier thought.

In this context, Tokyo's Nikkei 225 index gained 1% to 28,234.29 while the Kospi in South Korea was little changed at 2,626.14. 

In Sydney, the S&P/ASX 200 advanced 0.4% to 7,121.10.

Hong Kong's Hang Seng index jumped 2.1% to 21,987.92 as Chinese technology stocks surged after Beijing approved a new batch of video games. 

That was seen as a sign the business outlook for tech companies is improving after a prolonged regulatory crackdown.

On this wake, Tencent, China's largest games firm, rose 4.7%. 

E-commerce giant Alibaba Group Holding soared 8.1% and food delivery concern Meituan advanced 3.6%.

The Shanghai Composite index reversed early losses, gaining 0.5% to 3,259.24.

In currency trading, the U.S. dollar was trading at 133.13 Japanese yen, up from 132.61 yen. The euro slipped to $1.0682 from $1.0705.

On the weather side, rains will be variable between until Friday, per the latest 72-hour cumulative precipitation map from NOAA. 

Much of Minnesota will remain dry during that time, for example, while parts of Kansas, Missouri and Arkansas could gather another 1.5” or more. 

NOAA’s 8-to-14-day outlook predicts seasonally dry conditions for most of the Corn Belt between June 14 and June 20, with warmer-than-normal temperatures likely for the southern half of the country next week.

On the demand side, Census corn data confirmed 274.58 mbu were exported during April. 

That was down 6% from March and was 18% lower yr/yr. 

The official corn export for the season through April was 1.67 bbu. 

The Census data showed DDGS exports were 813,749 MT during April. 

Ethanol exports were a record for the month of April, with 185.19m gallons shipped. 

As for soybean, Census reported 134.38 mbu of US soybeans were shipped during the month of April. 

That was an all-time high for the month, and was up 14% from March exports. 

The MYTD confirmed export total was up to 1.78 bbu through April. 

For the products, Census reported 1.07 MMT of soymeal was exported (even with March and up 12% yr/yr), with 76,241 MT of soy oil.

For wheat, April wheat exports were 64.32 mbu according to Census. 

That set the MYTD total to 735.4 mbu, with just May data to be confirmed. 

Meantime, trader estimates ahead of Friday’s WASDE are calling for US domestic corn carryout to be 3.2 mbu tighter at 1.436 bbu. 

The high end is for a 60 mbu boost to 1.5 billion, while the lowest estimate is to see old crop stocks fall to 1.386 billion. 

New crop estimates range from 1.505 to 1.198 billion bushels, compared to the May figure of 1.360. 

On average, the trade is looking for a 9 mbu trim. 

Global old crop stocks are expected to be tightened by 600k MT to 308.8 MMT. 

Global new crop carryout is also estimated 600k MT lighter on average, to 304.5 MMT. 

As for soybean, analysts expect USDA to put old crop carryout as 219.3 mbu. 

That would be a 15.7 mbu cut from May if realized, though the range is to see between a 5 mbu bump to a 60 mbu cut. 

For new crop soybeans, traders surveyed expect USDA to cut 15.9 mbu to 294. 

The full range is from 250 to 355 mbu. 

On the global stage, estimates are to see 84.9 MMT carried into 22/23 and 99.5 MMT carried into 23/24. 

If realized that would be a 300k MT trim and a negligible 100k MT trim from May respectively. 

As for wheat, survey responses show the trade average guess for old crop wheat stocks is 665.8 mbu, compared to USDA’s May 655 mbu figure. 

The WASDE will report their guess on Friday, with NASS data confirming 21/22 wheat carryout in the June 30th Grain Stocks report. 

New crop wheat stocks are estimated to be between 550 and 680 mbu in the June WASDE. 

The average trade guess would be a 3.7 mbu drop from May if realized. 

Global wheat stocks are estimated between 275 MMT and 281.3 MMT for old crop. 

New crop wheat carryout is expected to be reported between 260 and 272 MMT on Friday. 

The average trade estimates are for a 100k MT trim and a 300k MT boost respectively.  

In this context, corn basis bids were mostly steady to firm across the central U.S. after firming 3 to 15 cents higher across a half-dozen Midwestern locations yesterday. 

An Iowa processor bucked the overall trend after sliding 3 cents lower.

Soybean basis bids fell 3 cents at an Illinois river terminal, while firming 5 cents at an Indiana elevator and holding steady elsewhere across the central U.S.,

Commodity funds were net buyers of CBOT corn, soybean, soymeal and soyoil futures contracts on Tuesday. 

The funds were net sellers of wheat.

Meantime, the latest readings from the Purdue University / CME Group’s Ag Economy Barometer show farmer sentiment has fallen to the lowest levels since the beginning of the pandemic in early 2020, with a new score of 99 (anything above 100 is considered positive). 

Another point worth noting – of farmers surveyed, 78% said it was a bad time to invest in things such as machinery and buildings.

From South America, Brazil’s Anec anticipates the country will export 9,41 MMT of soybeans in June. 

Brazil may also export around 1,45 MMT of corn this month.

Meantime, Brazil's Agriculture Minister Marcos Montes on Tuesday said the 2022/23 grain crop is "saved" as Russia is still sending fertilizers to the South American nation.

Faced with supply uncertainties related to Russia's war in Ukraine, Brazil negotiated with Russia to secure fertilizer shipments, Montes said.

Brazil, which imports over 85% of its needs, has purchased 16.64 million tons of fertilizers through May, up 16.5% from the same period in 2021, according to data from the shipping agency Cargonave.

Russia has sold 3.06 million tons of fertilizers to Brazil during the period, making it the country's No. 1 supplier.

In Europe, Euronext wheat fell steeply on Tuesday to give back most of its day-earlier gains as the market continued to react to news about potential exports from war-torn Ukraine.

September milling wheat indeed was down 3.02% at 385.50 euros ($412.45) a tonne.

The front-month contract had climbed 5.1% on Monday as weekend news of Russian strikes on Kyiv and the port of Mykolaiv had dampened expectations that a diplomatic deal could be reached to resume sea shipments of Ukrainian grain.

However, Turkey's defence minister reiterated on Tuesday that his country was coordinating with Russia and Ukraine to agree a plan to re-start grain exports from Ukrainian ports, a day before Turkey's foreign minister hosts his Russian counterpart for talks.

Russia's defence minister, meanwhile, said the ports of Berdyansk and Mariupol, located on Ukraine's Sea of Azov coastline seized by Moscow, were ready to resume grain shipments and that Russian forces had restored railway traffic across southern and eastern Ukraine.

"This shows that infrastructure can be re-established quite quickly," one dealer said.

"But then there's the question of the origin of the grain and if it will be possible to trade it" the dealer added.

Wheat prices were also curbed by rain relief for U.S. and European winter wheat.

In France, traders said showers may boost yield prospects for cereals after a dry spring, although farming organisations warned of local damage to fields hit by hailstones during storms on Saturday.

On this wake, France's farm ministry on Wednesday forecast higher production of winter barley and rapeseed this year.

An increase in sowing area could offset lower yields while some crops suffered from drought.

In its first production estimates for 2022, the ministry projected the French winter barley crop at 8.25 million tonnes, up 0.4% compared with last year.

For winter rapeseed, the crop was pegged at 3.87 million tonnes, up 17.8% year-on-year.

The winter barley crop forecast was based on an expected yield of 6.50 tonnes per hectare, down from 6.85 last year, and an estimated crop area of 1.27 million hectares, up from 1.20 million in 2021, the ministry said.

The projected winter rapeseed production was based on an expected yield of 3.26 tonnes per hectare, down from 3.35 last year, and an estimated crop area of 1.19 million hectares, up from 979,000 in 2021.

Winter rapeseed accounts for almost all rapeseed production in France. 

Barley production, however, includes a significant portion of spring crop, with this year's spring barley area estimated at 555,000 hectares.

In area revisions, the ministry lowered its estimate for soft wheat to 4.76 million hectares from 4.80 million projected last month and now 4.5% below last year's level.

As for durum, the ministry also lowered its estimate to 276,000 hectares from 285,000 projected last month and now 6.4% below last year's level.

For sunflower seed, the 2022 area was pegged at 797,000 hectares, up from 758,000 hectares forecast last month and now the highest level this century, the ministry said.

Farmers have switched to sunflower seed as a cheaper option amid spiralling costs for fertiliser and energy, while cutting back on maize planting.

The estimated grain maize area, excluding crop grown for seeds, was cut slightly to 1.36 million hectares from 1.37 million a month ago, now 7.0% down on 2021.

Meantime, weekly European Union data showed EU soft wheat exports in 2021/22 had reached 25.34 million tonnes, slightly above the year-earlier level.

The cumulative barley volumes exported from Europe are also up, reaching 6.78 Mt of barley exported.

The latest figure from the European Commission shows a volume of imported corn of 15.34 Mt at the beginning of June, trending moderately above last year’s pace so far.

European Union soybean imports during the 2021/22 marketing year are trending slightly below last year’s pace, reaching 13,56 MMT through June 5. 

EU soymeal imports are also down from a year ago, with 15.20 million metric tons over the same period.

From North Africa, Tunisia's grain harvest is expected to increase by 10% this year to 1.8 million tonnes, Agriculture Minister Mhamoud Elyess Hamza said on Tuesday. 

Meantime, Tunisia will start next year gradual cuts in energy and food subsidies coupled with financial transfers to vulnerable families, the government said on Tuesday, announcing a key reform demanded by international lenders.

Tunisia is in talks with the International Monetary Fund to agree on a $4 billion loan in return for an unpopular reform package to shore up its struggling public finances.

Starting next year prices of gas for households will go up. 

Domestic fuel prices are set to keep rising until they reach market levels in three years.

Budget spending on subsidies rose to more than 5 billion Tunisian dinars ($1.64 billion) from 3 billion dinars last year , Trade Minister Fadhila rahbi said.

($1 = 3.0432 Tunisian dinars).

From the Black Sea basin, grain shipments will resume from Ukraine's Russian-occupied Black Sea port of Berdyansk this week after work was completed to de-mine it, Russia's TASS news agency cited local authorities as saying on Wednesday.

Meantime, Turkey's foreign minister said on Wednesday a U.N. plan to open a corridor to restart Ukrainian grain exports was reasonable and requires more talks with all sides to ensure ships would be safe.

Speaking alongside Russian Foreign Minister Sergei Lavrov, Turkey's Mevlut Cavusoglu said their meeting in Ankara was fruitful, including a will to return to negotiations between Moscow and Kyiv for a possible ceasefire.

Meantime, according to APK-Inform, the prices of Ukrainian wheat continued growing last week.

Particularly, the indicative offer prices of old-crop 12.5%, 11.5% and feed wheat increased by 5-10 USD/t to 410-435, 405-430 and 365-390 USD/t FOB.

Trade activity on the forward market remained low due to high risks and unclear prospects of Ukrainian export. 

The indicative offer prices of new-crop 12.5%, 11.5% and feed wheat increased by average 20 USD/t to 405-430, 400-425 and 370-390 USD/t FOB (July-August).

The export prices of Ukrainian corn, in contrast, decreased sizably at the western borders last week.

Along with the bearish factors on the ports of the Danube, the prices were pressured by limited export, expected lowering of the demand from the EU, partially due to high transportation costs as well as delays of deliveries.

Thus, the bid/offer prices of Ukrainian corn decreased significantly and totaled 225-245/245-260 USD/t DAP Izov and Yahodin (June). 

The bid/offer prices totaled 250-260/255-265 USD/t DAP Chop.

The export prices of crude sunflower oil on DAP basis were decreasing in May.

The downward trend was based on lower demand from importers amid stronger shipments of sunflower seed. 

Shipments of Ukrainian sunflower seed in May was almost 2 times higher compared to the full previous season. 

Importers raised their own sunflower seed crushing to cover partially the demand for sunflower oil.

Previous growth of sunflower oil export that allowed EU’s buyers to accumulate stock pressured the prices too.

Thus, the bid prices of crude sunflower oil decreased by 150-250 USD/t over the reporting period and as of morning of June 8 totaled 1550-1700 USD/t DAP for delivery to importing country, mainly Poland, Bulgaria, Romania and Lithuania.  

The government of Ukraine is preparing for harvesting campaign in wartime, the prime minister of Ukraine Denys Shmyhal wrote on his Facebook page on June 8.

The first challenge is export. 

The Ministry of Infrastructure is working on extension of capacities at the western land borders. 

There are 23.5 mln tonnes of grains and oilseeds in Ukraine that cannot be exported.

Another problem is storing of the new harvest. 

On this wake, the Ministry of Agrarian Policy and Food is studding an option of mobile storages taking into account international experience. 

It will let to raise storage capacity by 10-15 mln tonnes.

In Russia, since July 1, 2022, the export duty on sunflower oil will increase from 525 USD/t acting in June to 560.1 USD/t, informs Ministry of Agriculture of Russia.

The upward correction is based on the growth of the indicative price of the product from 1750 USD/t to 1800.2 USD/t.

A decree of Russian government No546 as of April 6, 2021 implemented a damper mechanism on sunflower oil export that provided for the imposition of the floating export duty in the amount of 70% for the period from September 1, 2021 to August 31, 2022.

Since July 1, the export duty on sunflower meal will decrease from 105 USD/t acting in June to 89.4 USD/t.

In Kazakhstan, Kazakhstan’s Ag Minister estimated the 22/23 wheat crop between 13 and 13.5 MMT. 

From the Middle Kingdom, China’s wheat harvest reached 55% completion as of 6/6 according to their Ministry of Agriculture and Rural Affairs.

From South East Asia, Indonesia Trade Minister Muhammad Lutfi said on Tuesday the government would bring down its combined maximum crude palm oil export and levy rate to $488 per tonne from $575 per tonne to encourage shipments.

The government would raise the maximum tax to $288 per tonne, but lower maximum levy to $200 per tonne, Lutfi said. 

Indonesia currently charges a maximum $200 per tonne for export tax and a maximum $375 per tonne for levy.

Lutfi did not specify when the new fees will be imposed.

In India, the government is likely to allow exports of nearly 500,000 mt of wheat in the near term after it banned shipments on May 13, officials in the Indian trade ministry told S&P Global Commodity Insights June 7.

The officials also said that this will be the second tranche of exports allowed since the ban was imposed. 

Recently, India cleared 469,000 mt of wheat exports, mainly to Bangladesh, the Philippines, Tanzania and Malaysia, they added.

The May 13 ban cut India’s exports to 1.13 million mt in May, down 23% on month, against a record 1.46 million mt in April, an official with the food ministry said.

There is still around 1.7 million mt of wheat stuck at several ports, including Mundra and Kandla, as exporters moved large volumes of wheat amid robust export demand and the likelihood of comfortable domestic supplies, dealers with two global export firms said.

However, Indian traders were anxious about future shipments after Turkey rejected a consignment of 56,877 mt of Indian durum wheat on phytosanitary concerns.

Despite the decline in output and the restrictions on exports, Indian traders expect the authorities to allow up to 7.5 million mt of wheat exports in MY 2022-23.

From Australia, markets remained sluggish yesterday. 

Current crop wheat markets gained best-case $5/t across the board. 

Barley also firmed a fraction but yet again the bids and offers remained wide and liquidity was thin. 

New crop wheat markets were largely unchanged while new crop canola bids put on $20-30/t.

Viterra released its latest monthly receivals report taking in 14,100t of grain from 2nd May to 5th June. 

With majority of the deliveries from growers being lentils, wheat and barley and 12,000t of it was taken direct to Viterra port terminals.

On the weather side, BOM released its latest Climate Driver Update yesterday flagging that the 2021-22 La Nina event is slowly weakening in the tropical Pacific versus two weeks ago. 

We will see warmer than average sea surface temperatures around much of Australia which still favours average to above average winter rainfall for Eastern Australia.

On international trade scene, Feedmakers in the Philippines bought around 53,000 tonnes of corn, likely to be sourced from South America, in a recent deal and are likely to buy one more cargo, two Singapore-based traders said.

The deal was signed at around $405-$410 a tonne, including cost and freight (C&F) for July shipment.

"We were a bit surprised by the price paid by buyers in the Philippines, giving the fact that corn to Vietnam is quoted around $385 a tonne, C&F," said one of the traders. 

"They are likely to purchase another cargo, likely tomorrow, of around 50,000 to 55,000 tonnes for August shipment."

The Philippines has cut the tariff rate for corn to 5%-15% from 35%-50% to tame rising food inflation.

That's all.

To all of you, I wish you a good day.

Author: Sandro F. Puglisi  

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